Agent Disclaimer of Liability
(Long Form)

Summary

This clause is a disclaimer of liability by the administrative agent related to any benchmark interest rate relied upon in the credit agreement. This disclaimer applies to both lenders and borrowers. This clause includes practical guidance, drafting notes, and alternate clauses. The pronouncement that LIBOR for USD loans will cease to be available in 2023 triggered tremendous developments in drafting for not only a primary alternative to LIBOR—term SOFR has widely been adopted as such successor rate—but also for a hardwired mechanic that can be used to identify a successor rate should any future benchmark rate become unavailable during the life of a loan. Notably, utilizing, or converting an existing benchmark rate to, SOFR—or any other replacement index—can result in the all-in yield to the lenders, and the overall costs to the borrower, shifting from what parties originally intended. Given the alteration of economics associated with an interest rate change, agents have sought to incorporate disclaimers of liability for making certain changes and modifications, unilaterally or with the consent of borrower, via the benchmark replacement provision or section within Article 2/II of a credit agreement. This template provides such disclaimer language as well as commentary on the defined terms associated with interest rate benchmark replacement and conforming changes related thereto. For a full listing of key content covering a credit agreement, see Credit Agreement Resource Kit.